Showing posts with label outlook. Show all posts
Showing posts with label outlook. Show all posts
Thursday, 7 July 2022
Thursday, 30 June 2022
Stagflationary global debt crisis looms – and things will get much worse
The global financial and economic outlook for the year ahead has soured rapidly in recent months, with policymakers, investors and households now asking how much they should revise their expectations, and for how long. That depends on the answers to six questions.
First, will the rise in inflation in most advanced economies be temporary or more persistent? This debate has raged for the past year but now it is largely settled: “Team Persistent” won, and “Team Transitory” – which previously included most central banks and fiscal authorities – must admit to having been mistaken.
The second question is whether the increase in inflation was driven more by excessive aggregate demand (loose monetary, credit, and fiscal policies) or by stagflationary negative aggregate supply shocks (including the initial Covid-19 lockdowns, supply-chain bottlenecks, a reduced US labour supply, the impact of Russia’s war in Ukraine on commodity prices, and China’s “zero-Covid” policy). While demand and supply factors were in the mix, it is now widely recognised that supply factors have played an increasingly decisive role. This matters because supply-driven inflation is stagflationary and thus raises the risk of a hard landing (increased unemployment and potentially a recession) when monetary policy is tightened. That leads directly to the third question: will monetary-policy tightening by the US Federal Reserve and other major central banks bring a hard or soft landing? Until recently, most central banks and most of Wall Street occupied “Team Soft Landing”. But the consensus has rapidly shifted, with even the Fed Chair, Jerome Powell, recognising that a recession is possible, and that a soft landing will be “very challenging”.
Moreover, a model used by the Federal Reserve Bank of New York shows a high probability of a hard landing, and the Bank of England has expressed similar views. Several prominent Wall Street institutions have now decided that a recession is their baseline scenario (the most likely outcome if all other variables are held constant). In the US and Europe, forward-looking indicators of economic activity and business and consumer confidence are heading sharply south.
The fourth question is whether a hard landing would weaken central banks’ hawkish resolve on inflation. If they stop their policy-tightening once a hard landing becomes likely, we can expect a persistent rise in inflation and either economic overheating (above-target inflation and above potential growth) or stagflation (above-target inflation and a recession), depending on whether demand shocks or supply shocks are dominant.
Most market analysts seem to think that central banks will remain hawkish but I am not so sure. I have argued that they will eventually wimp out and accept higher inflation – followed by stagflation – once a hard landing becomes imminent because they will be worried about the damage of a recession and a debt trap, owing to an excessive buildup of private and public liabilities after years of low interest rates.
Now that a hard landing is becoming a baseline for more analysts, a new (fifth) question is emerging: Will the coming recession be mild and short-lived, or will it be more severe and characterised by deep financial distress? Most of those who have come late and grudgingly to the hard-landing baseline still contend that any recession will be shallow and brief. They argue that today’s financial imbalances are not as severe as those in the run-up to the 2008 global financial crisis, and that the risk of a recession with a severe debt and financial crisis is therefore low. But this view is dangerously naive.
There is ample reason to believe that the next recession will be marked by a severe stagflationary debt crisis. As a share of global GDP, private and public debt levels are much higher today than in the past, having risen from 200% in 1999 to 350% today (with a particularly sharp increase since the start of the pandemic). Under these conditions, rapid normalisation of monetary policy and rising interest rates will drive highly leveraged zombie households, companies, financial institutions, and governments into bankruptcy and default.
The next crisis will not be like its predecessors. In the 1970s, we had stagflation but no massive debt crises because debt levels were low. After 2008, we had a debt crisis followed by low inflation or deflation because the credit crunch had generated a negative demand shock. Today, we face supply shocks in a context of much higher debt levels, implying that we are heading for a combination of 1970s-style stagflation and 2008-style debt crises – that is, a stagflationary debt crisis.
When confronting stagflationary shocks, a central bank must tighten its policy stance even as the economy heads toward a recession. The situation today is thus fundamentally different from the global financial crisis or the early months of the pandemic, when central banks could ease monetary policy aggressively in response to falling aggregate demand and deflationary pressure. The space for fiscal expansion will also be more limited this time. Most of the fiscal ammunition has been used, and public debts are becoming unsustainable.
Moreover, because today’s higher inflation is a global phenomenon, most central banks are tightening at the same time, thereby increasing the probability of a synchronised global recession. This tightening is already having an effect: bubbles are deflating everywhere – including in public and private equity, real estate, housing, meme stocks, crypto, Spacs (special purpose acquisition companies), bonds, and credit instruments. Real and financial wealth is falling, and debts and debt-servicing ratios are rising.
That brings us to the final question: will equity markets rebound from the current bear market (a decline of at least 20% from the last peak), or will they plunge even lower? Most likely, they will plunge lower. After all, in typical plain-vanilla recessions, US and global equities tend to fall by about 35%. But because the next recession will be stagflationary and accompanied by a financial crisis, the crash in equity markets could be closer to 50%.
Regardless of whether the recession is mild or severe, history suggests that the equity market has much more room to fall before it bottoms out. In the current context, any rebound – such as the one in the last two weeks – should be regarded as a dead-cat bounce, rather than the usual buy-the-dip opportunity. Though the current global situation confronts us with many questions, there is no real riddle to solve. Things will get much worse before they get better.
There is ample reason to fear big economies such as the US face recession and financial turmoil writes Nouriel Roubini in The Guardian
Saturday, 14 March 2015
“Spare Afzal Guru and hang Arundhati Roy.” A Tribute to Vinod Mehta from Arundhati Roy
When he published the Radia tapes, Vinod Mehta did what a good editor should. By making public the dirty diaries of the ongoing cluster-f..k between politicians, journalists, journalist/lobbyists and their corporate sponsors, he broke the club rules of the cosy oligarchy that runs our country. Not surprisingly, when the curtain went down on the show, for the people who were exposed in the Radia tapes, it turned out to be nothing more than a slightly embarrassing blip in the upward arc of their ambitions. For Vinod Mehta, however, the consequences were serious. I have no doubt they played a role in hastening his end.
Anyway, he’s gone now, and with him perhaps the era of the intractable, unpredictable, idiosyncratic editor. Not because there aren’t idiosyncratic folks around any more, but because we live in a climate where it’s becoming increasingly difficult for them to function. The outpouring of grief at his passing by all kinds of people, including those who are professionally his polar opposite, seems to be as much for him as for the end of idea of the independent-minded editor. In some ways it must be seen as a credit to Outlook’s proprietors that they made room for a maverick like Vinod Mehta, despite being targeted and having their offices raided several times. As for the rest of us, while we grieve for Vinod, we cannot give up on the possibility that there can be independent editors in future too.
I will miss Vinod very much. He played such an important part in my life as a writer.
It’s not that we agreed about everything, we certainly had our differences—about the Congress party, about Kashmir (of course), about the politics of caste, about his strange, recently rehashed biography of Meena Kumari. But this time around, the disagreement between us is permanent and irreversible. I maintain that he shouldn’t have left. He could have stuck around with us a little longer. But he’s just bloody well gone. It’s ridiculous. I don’t agree.
After The God of Small Things was published in 1997, I was aware that I ran the risk of turning into a sort of Interpreter of the East for the western media. This I did not wish upon myself. Whatever I wrote, whatever arguments I got into, whatever hooliganism I was involved in, I wanted it to be here. Not for reasons of any great nationalism on my part, nor because this is my country, but simply because this is where I live. Vinod Mehta became my partner in this enterprise. Almost everything I have written since 1998 was first published by him in Outlook.
Very early on in our alliance, regardless of any commentary to the contrary (and of that there was plenty) we both understood that neither was doing the other a favour. That, I believe, is a rare and wonderful thing in any relationship. Over the many years we worked together, we spoke several times on the phone, but we hardly ever met. I’ve never been to his house. He visited me only once, recently, but it was more like an inspection tour than a visit. It was as though he had come just to confirm an idea he had in his head about the way I live. He shuffled in, took a look around and shuffled out. I don’t think either of us knew how to play Guest and Host. At any rate we weren’t very good at it. That’s about it as far as our social life went.
And yet, out of this peculiar, laconic, minimalist relationship came a body of work that amounts to five volumes of collected essays and interviews that have been subsequently republished in several languages in several newspapers and magazines in India as well as the rest of the world. What does all this have to do with Vinod Mehta? Quite a lot actually. I wrote the essays, yes, but the freedom and the urgency with which I wrote had much to do with knowing that Vinod Mehta would publish them—without force-fitting them into some pre-determined magazine format. This was no joke. Outlook was, and is, a major, commercial, mass-circulation newsmagazine. That is its strength. And yet, Vinod had the self-confidence and the flexibility to publish, from time to time, these long, unorthodox, often unpopular essays that almost always created a storm.
The rules were set early on. When I sent him The End of Imagination, the essay I wrote after the 1998 nuclear tests, he called me and said, “Do you really want to say ‘Who the hell is the Prime Minister to have his finger on the nuclear button?’ Can I change it to ‘Who is the Prime Minister?’” I said I’d rather he didn’t. So ‘who the hell’ stayed. Then came my turn to ask him for something. Acutely aware of the mined terrain I was wading into, I asked him whether he could avoid putting a picture of me on the cover. He said he’d see what he could do. It was his delicate way of telling me to take a hike. The issue came out, with a photograph of me on the cover, and the most controversial sentence in the essay splashed across it: I Secede. All hell broke loose.
These then, were our unspoken Rules of Engagement. Vinod would not make any alteration to my text without my consent. In turn, even if my essay was going to be the cover story, I would stay out of any discussions about the content and design of the cover. This went on for fifteen years.
At one point during his funeral, there was a strange, poignant moment that I don’t really know what to make of. I found myself facing L.K. Advani, separated by the length of Vinod’s flower bedecked body. Advani was laying a wreath at his feet. I was standing around trying to say goodbye (or not) to Vinod in my head. I was reminded of the only time he ever cautioned me. It was 2006. The papers had announced that Afzal Guru, convicted for his role in the December 13, 2001, Parliament attack, was going to be hanged in a few days. I was dismayed because I had followed the case closely for several years and had studied the legal papers. I knew that much of the evidence was either extremely flimsy or fabricated. (There was plenty to suggest that it could even have been a false flag attack.) Hanging Afzal would mean putting an end to the possibility of getting answers to some very disturbing questions. Outrageously, the Supreme Court judgement said that though there was no direct evidence against Afzal, it was sentencing him to death “in order to satisfy the collective conscience of society”. Meanwhile, the BJP, with Advani at the forefront (he was the home minister in 2001 when the attack took place), had begun a noisy campaign: “Desh abhi sharminda hai, Afzal abhi bhi zinda hai (The country is ashamed, because Afzal is still alive).” I knew I would not be able to live with myself if I said nothing despite knowing what I knew. I called Vinod and said I wanted to write something. For the first (and only) time he said: “Arundhati, don’t. The mood is ugly. They will turn on us. They will harm you.” It didn’t take long to convince him that we could not keep quiet on this one. I wrote a long essay called And his Life Should be made Extinct—the title was a quote from the Supreme Court judgement.
The Outlook cover said, in bold letters,Don’t Hang Afzal. (Of course, the Congress-led UPA government—and not the BJP—did eventually hang him a few years later, in 2013, in the most cowardly, illegal and shabby way.)
After the issue came out, the floodgates opened and once again Outlook was deluged with insults for weeks. But this was the other part of our Rules of Engagement. Vinod would publish what I wrote, but then would open up the letters pages for abusive responses for weeks at a stretch. (After the 2008 Mumbai attacks, Sashi, Vinod’s secretary of 25 years showed me some angry letters-to-the editor that had begun to arrive even before I had written anything.) No other magazine I know publishes insults to itself, its contributors and its editor so gleefully. Vinod seemed to derive endless amusement from those letters. Occasionally, he would call and chuckle about the ones he particularly liked. His favourite letter after the Afzal Guru issue was one that said, “Spare Afzal Guru and hang Arundhati Roy.” Of course, he published it.
And now, suddenly, here we were, Advani and I, grieving at his funeral. I was unnerved. Perhaps it showed grace on Advani’s part and none on mine. I don’t know. I can’t imagine what Vinod would have thought.
The last essay of mine that Vinod published before he retired as the editor of Outlook was Walking with the Comrades, my account of the weeks I spent inside the forest in Bastar with Maoist guerrillas. B.G. Verghese, who recently passed away too, wrote a response to it. And then extraordinarily, Vinod published a reply to his response by Cherukuri Rajkumar, better known as Comrade Azad, a member of the politburo of the CPI (Maoist). It was a remarkable thing for him to have done. He called me, sounding pleasantly surprised at how calm and reasonable Azad sounded. By the time his reply (A Last Note to a Neo-colonialist) was published, Azad had been kidnapped in Nagpur by plainclothes policemen and summarily executed in the Dandakaranya forest on the Andhra-Chhattisgarh border.
I had a last phone call from Vinod just before he fell ill. He said, “Listen Arundhati, I’ve never asked you for anything, but I’m asking now. Actually I’m not asking you, I’m telling you. You have to launch my new book, Editor Unplugged. I know you don’t do these things, but you just have to.” I laughed and said I would. A few days later he called again, naughtily. “Oh, I didn’t tell you, but the other person on stage with us will be Arnab Goswami.” I don’t think he told Arnab his plans. The crafty old fox was playing us!
The three of us on stage together. Hilarious. I’d have done it for Vinod Mehta, though. Gladly. But now he’s shuffled off somewhere. He shouldn’t have gone. I really need to talk to him.
Anyway, he’s gone now, and with him perhaps the era of the intractable, unpredictable, idiosyncratic editor. Not because there aren’t idiosyncratic folks around any more, but because we live in a climate where it’s becoming increasingly difficult for them to function. The outpouring of grief at his passing by all kinds of people, including those who are professionally his polar opposite, seems to be as much for him as for the end of idea of the independent-minded editor. In some ways it must be seen as a credit to Outlook’s proprietors that they made room for a maverick like Vinod Mehta, despite being targeted and having their offices raided several times. As for the rest of us, while we grieve for Vinod, we cannot give up on the possibility that there can be independent editors in future too.
I will miss Vinod very much. He played such an important part in my life as a writer.
It’s not that we agreed about everything, we certainly had our differences—about the Congress party, about Kashmir (of course), about the politics of caste, about his strange, recently rehashed biography of Meena Kumari. But this time around, the disagreement between us is permanent and irreversible. I maintain that he shouldn’t have left. He could have stuck around with us a little longer. But he’s just bloody well gone. It’s ridiculous. I don’t agree.
After The God of Small Things was published in 1997, I was aware that I ran the risk of turning into a sort of Interpreter of the East for the western media. This I did not wish upon myself. Whatever I wrote, whatever arguments I got into, whatever hooliganism I was involved in, I wanted it to be here. Not for reasons of any great nationalism on my part, nor because this is my country, but simply because this is where I live. Vinod Mehta became my partner in this enterprise. Almost everything I have written since 1998 was first published by him in Outlook.
|
Very early on in our alliance, regardless of any commentary to the contrary (and of that there was plenty) we both understood that neither was doing the other a favour. That, I believe, is a rare and wonderful thing in any relationship. Over the many years we worked together, we spoke several times on the phone, but we hardly ever met. I’ve never been to his house. He visited me only once, recently, but it was more like an inspection tour than a visit. It was as though he had come just to confirm an idea he had in his head about the way I live. He shuffled in, took a look around and shuffled out. I don’t think either of us knew how to play Guest and Host. At any rate we weren’t very good at it. That’s about it as far as our social life went.
And yet, out of this peculiar, laconic, minimalist relationship came a body of work that amounts to five volumes of collected essays and interviews that have been subsequently republished in several languages in several newspapers and magazines in India as well as the rest of the world. What does all this have to do with Vinod Mehta? Quite a lot actually. I wrote the essays, yes, but the freedom and the urgency with which I wrote had much to do with knowing that Vinod Mehta would publish them—without force-fitting them into some pre-determined magazine format. This was no joke. Outlook was, and is, a major, commercial, mass-circulation newsmagazine. That is its strength. And yet, Vinod had the self-confidence and the flexibility to publish, from time to time, these long, unorthodox, often unpopular essays that almost always created a storm.
The rules were set early on. When I sent him The End of Imagination, the essay I wrote after the 1998 nuclear tests, he called me and said, “Do you really want to say ‘Who the hell is the Prime Minister to have his finger on the nuclear button?’ Can I change it to ‘Who is the Prime Minister?’” I said I’d rather he didn’t. So ‘who the hell’ stayed. Then came my turn to ask him for something. Acutely aware of the mined terrain I was wading into, I asked him whether he could avoid putting a picture of me on the cover. He said he’d see what he could do. It was his delicate way of telling me to take a hike. The issue came out, with a photograph of me on the cover, and the most controversial sentence in the essay splashed across it: I Secede. All hell broke loose.
These then, were our unspoken Rules of Engagement. Vinod would not make any alteration to my text without my consent. In turn, even if my essay was going to be the cover story, I would stay out of any discussions about the content and design of the cover. This went on for fifteen years.
|
The Outlook cover said, in bold letters,Don’t Hang Afzal. (Of course, the Congress-led UPA government—and not the BJP—did eventually hang him a few years later, in 2013, in the most cowardly, illegal and shabby way.)
After the issue came out, the floodgates opened and once again Outlook was deluged with insults for weeks. But this was the other part of our Rules of Engagement. Vinod would publish what I wrote, but then would open up the letters pages for abusive responses for weeks at a stretch. (After the 2008 Mumbai attacks, Sashi, Vinod’s secretary of 25 years showed me some angry letters-to-the editor that had begun to arrive even before I had written anything.) No other magazine I know publishes insults to itself, its contributors and its editor so gleefully. Vinod seemed to derive endless amusement from those letters. Occasionally, he would call and chuckle about the ones he particularly liked. His favourite letter after the Afzal Guru issue was one that said, “Spare Afzal Guru and hang Arundhati Roy.” Of course, he published it.
And now, suddenly, here we were, Advani and I, grieving at his funeral. I was unnerved. Perhaps it showed grace on Advani’s part and none on mine. I don’t know. I can’t imagine what Vinod would have thought.
The last essay of mine that Vinod published before he retired as the editor of Outlook was Walking with the Comrades, my account of the weeks I spent inside the forest in Bastar with Maoist guerrillas. B.G. Verghese, who recently passed away too, wrote a response to it. And then extraordinarily, Vinod published a reply to his response by Cherukuri Rajkumar, better known as Comrade Azad, a member of the politburo of the CPI (Maoist). It was a remarkable thing for him to have done. He called me, sounding pleasantly surprised at how calm and reasonable Azad sounded. By the time his reply (A Last Note to a Neo-colonialist) was published, Azad had been kidnapped in Nagpur by plainclothes policemen and summarily executed in the Dandakaranya forest on the Andhra-Chhattisgarh border.
I had a last phone call from Vinod just before he fell ill. He said, “Listen Arundhati, I’ve never asked you for anything, but I’m asking now. Actually I’m not asking you, I’m telling you. You have to launch my new book, Editor Unplugged. I know you don’t do these things, but you just have to.” I laughed and said I would. A few days later he called again, naughtily. “Oh, I didn’t tell you, but the other person on stage with us will be Arnab Goswami.” I don’t think he told Arnab his plans. The crafty old fox was playing us!
The three of us on stage together. Hilarious. I’d have done it for Vinod Mehta, though. Gladly. But now he’s shuffled off somewhere. He shouldn’t have gone. I really need to talk to him.
Wednesday, 17 October 2012
Shakeup of A-levels
Reforms expected to include eventual scrapping of A-level modules and introduction of dissertations of up to 5,000 words
Michael Gove's plans have been criticised by Labour, who say they ignore important subjects such as computing and engineering. Photograph: Gideon Mendel/Corbis
The education secretary, Michael Gove, is to shake up the A-level system as he moves to introduce the principles of the international baccalaureate (IB) to schools in England.
Students hoping to attend the elite Russell Group of universities will be expected to write dissertations of up to 5,000 words and to show an academic breadth of knowledge.
Anyone studying arts subjects, such as English and history, would be expected to choose a "contrasting" subject in the sciences or maths. Those studying the sciences would be expected to take a "contrasting" arts subject. The changes are designed to answer universities' complaints that too many students have a narrow outlook and often lack basic literacy skills.
Gove's latest move follows his announcement last month that he is to scrap GCSEs in favour of what he regards as a more academically rigorous English baccalaureate (EBacc) system.
In the next stage of reforms, Gove is not planning to scrap A-levels, but is hoping to drive up standards by developing an overall framework known as the ABacc. Students would still sit A-levels, but there would be major changes:
• It is expected that A-level modules would eventually be scrapped. Gove has done this with GCSEs and is minded to do so again with A-levels, though he is expected to move at a slower pace.
• Students would be stretched by being asked to write dissertations of up to 5,000 words. This would probably be in addition to their A-levels and would give them a higher overall ABacc grade. Many universities have complained that students often struggle to write longer essays.
Liz Truss, the new education minister who campaigned in favour of improving the teaching of maths in her days as a backbencher, has advocated longer essays.
While Gove is introducing the principles of the IB, he does not want to introduce the actual IB system across English schools, although it is favoured by many public schools. The qualification is managed from abroad and demands a breadth of subjects that would stretch many schools.
A Department for Education spokesman stressed that the plans, first disclosed in the Times, were at an early stage. "A-levels will not be replaced under any circumstances. There are public consultations about reforming A and AS-levels. There are also numerous suggestions about new ABacc league table measures but no decisions have been made." The Times said the mix would also include voluntary work.
Stephen Twigg, the shadow education secretary, said: "We support the concept of an ABacc. However, Labour would ensure it includes a broad range of subjects and sits alongside our proposed vocational courses. If these changes include community work, an extended project and a wider range of courses, then that is welcome.
"Unfortunately, Michael Gove seems to be ignoring important subjects like computing and engineering which are critical for the modern economy. The government must address the big challenges to ensure a One Nation education system – ensuring a gold standard route for vocational education and every pupil studying English and maths until the age of 18."
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